What is the dominant loan type originated by most financial institutions?

The dominant loan type originated by most financial institutions is the fixed payment, fully amortized mortgage. This type of mortgage is popular due to its predictability and stability. Borrowers appreciate having consistent monthly payments that do not fluctuate over the life of the loan, which helps them budget and manage their finances effectively.

Fully amortized mortgages ensure that each monthly payment contributes towards both the principal balance and interest, allowing borrowers to pay off the entire loan by the maturity date. This structure makes it an attractive option for homeowners who desire a straightforward repayment plan. Additionally, fixed-rate mortgages often provide lower interest rates over time, making them more appealing in stable or declining interest rate environments.

In contrast, adjustable-rate mortgages can lead to variability in payment amounts, which might be less appealing for many borrowers who prefer stability. Interest-only and balloon mortgages typically attract a smaller market due to their complexities and risks involved, as they do not require the borrower to pay down the principal initially or involve a large final payment. Therefore, the prevalence of fixed payment, fully amortized mortgages aligns well with consumer preferences and risk management strategies of lenders.